BANGALORE: Italy's l argest coffee company Lavazza is considering strategic partnerships to grow its cafe chainBarista in India, a top company official said without divulging much details.

Another person aware of Barista's plans said the company has decided against expanding on its own and is keen to appoint master franchisees - just as Yum! Restaurants International has done by appointing RJ Corp's foods arm Devyani International as India franchisee for Pizza Hut and Costa Coffee.

A top team from Barista will be in India next week to start negotiations with prospective franchisees, he added.

Giampaolo Arpe, chief commercial officer of the Lavazza Group, said: "We are open to exploring strategic partnerships to go ahead with our growth in the Indian market."

"Lavazza is primarily focused on its coffee vending business in India. Operating cafes is tough, which is why it has been looking at options of selling this business and has also considered franchising it to a third-party completely," an executive at a rival chain said, seeking anonymity.

The over century-old Lavazza entered India by snapping up Barista Coffee Company along with its mainstay coffee-vending business, Fresh & Honest, from the Sterling Group in 2007. Barista was earlier partly owned by the Tata Group.

The chain's troubles became visible over the past year as it shut several prime properties adjacent to Regal Cinema in Mumbai's Colaba area and at Barton Centre in Bangalore. Barista has shut 12-15 outlets in the past two months.

"The company has been unable to make profits and seems to have frozen expansions in the past six months," another rival retailer said. Several senior management executives of Lavazza's cafe business, headquartered in New Delhi, also quit the company in recent months.

Arpe said the worldwide economic crisis prompted Lavazza to review its foreign strategies, including India, to achieve more efficiency and flexibility "and, a chain of control appropriate for our times... This does not mean that we wish to exit from the current format; but it is about how we wish to look at our business."

He also pointed out that the strategy is to open cafes offering profitable opportunities and closing those where it is becoming near impossible to make them viable. Lavazza had opened over seven new Barista cafes in the past year.

Lavazza is largely into the business of coffee roasting and vending globally. Insiders say, India is the single-largest market for its cafe business, accounting for less than 3-4% of global revenue.

Industry players say that since cafes is not the flagship activity, Barista has stayed on the back foot when it comes to food offerings and its positioning in India. Also, the Lavazza formats are not quite mass-market. Arpe says Barista has discerning consumers who appreciate Italian coffee, which makes the product delivered premium and special in nature, yet accessible.

But that accessibility may not be quite enough. "The brand was never able to get hold of the right target group," one of its rivals said. While CCD has been positioned as an Indian brand in the value segment, global brands such as Costa Coffee, Gloria Jean's Coffees and Coffee Bean & Tea Leaf (CBTL) have pushed their international pedigree through a premium positioning.

Analysts say Lavazza has settled into the mid-segment and has tried to work its way up with higher-priced formats such as Lavazza Creme. "Changes in ownership have taken a toll on the brand's focus and expansion. Strengthening their supply chain can enable them to scale up," said Pratichee Kapoor, assistant VP at Technopak Advisors.

Technopak, a retail and consumer consulting firm, estimates the Indian cafe market at Rs 1,100 crore, growing at 20-22% as more people look for convenient, eating-out options. Last year, Lavazza launched a high-end cafe format Espression in New Delhi, followed by another in Bangalore, a third is slated for Mumbai this year.